Ground-Up Construction Loans in Tennessee
AAPL Member · Direct Lender Since 2016 · NMLS #1979189
Tennessee is one of the fastest-growing states in the country, and new construction is booming — especially across the Nashville metro, but also in Knoxville, Chattanooga, and the suburbs ringing every major market. Building from the dirt up is a different animal than buying an existing property, and the financing has to match. Ground-up construction loans in Tennessee from Tidal Loans fund land, materials, and labor through a draw schedule that tracks the build, so the money shows up when each phase is ready to pay for. We’ve financed Tennessee builders and investors as a direct lender since 2016.
A ground-up construction loan is short-term financing for building a new structure from scratch on a vacant or cleared lot. It’s underwritten around the project — the land, the plans, the budget, and what the finished property will be worth — and it disburses in milestones rather than in one lump sum. For Tennessee investors developing spec homes, infill projects, or small multifamily, it’s the financing built for the job.
Why Tennessee Is a Strong Market to Build In
Tennessee posted the nation’s eighth-largest population gain in 2025, adding roughly 68,800 residents to reach about 7.3 million (U.S. Census Bureau). Growth is concentrated exactly where builders want it: Davidson County (Nashville) was the state’s fastest-growing county, with Rutherford and Wilson close behind, and the Nashville metro — about 1.35 million people — is projected to clear 1.42 million by 2030. For a spec builder or build-to-rent investor, that is durable, front-loaded demand for new housing.
What makes new construction pencil here is the gap between that demand and supply. Statewide median rents have climbed sharply since 2020 while the state issued tens of thousands of new building permits in 2025 — supply is coming online, but it hasn’t caught the demand curve. That’s the setup ground-up construction is built for: you’re adding inventory into a market that’s still short of it, which supports both a clean spec-home sale and a strong rental takeout. We map that exit before we fund the build.
How Ground-Up Construction Loans Work
Two numbers drive most construction loans. The first is loan-to-cost (LTC) — how much of the total project cost we’ll fund, often a large majority, with you covering the rest through land equity or cash. The second is loan-to-after-completion-value — we also check that the loan stays within a comfortable percentage of what the finished property will be worth. The deal has to pencil out on both.
The mechanics run on the draw schedule. Rather than releasing all the money at closing, we disburse funds in stages as construction hits defined milestones — foundation, framing, mechanicals, drywall, finish work. Before each draw, an inspection confirms the work is complete, then funds release. You typically pay interest only on the balance drawn so far, so your early payments are small and grow as the project progresses. Model your numbers with our construction loan calculator, and see the full approach on our [ground-up construction hub](/ground-up-construction-loans/).
How the Numbers Work: An Illustrative Tennessee Spec Build
Say you’re building a single-family spec home outside Nashville. Land runs $80,000 and your total build budget — soft costs, site work, and vertical construction — is $320,000, for a $400,000 all-in project cost. The finished home appraises at an after-completion value of $560,000. Your loan is sized to the lesser of two caps: 90% of cost ($360,000) or 75% of ARV ($420,000). The cost cap is lower, so your max construction loan is $360,000, and you bring roughly $40,000 of the cost plus closing and interest carry. Because we charge non-Dutch interest, you only pay on funds as they’re drawn. Numbers are illustrative — run yours in our construction loan calculator.
What Tennessee Investors Build
The most common project we fund is the spec home — building a single-family house to sell on completion, the new-construction cousin of a [Tennessee fix and flip](/fix-and-flip-loans-tennessee/). The second is infill and teardown development, building on a vacant lot or replacing an outdated structure, which is especially active in Nashville’s in-town neighborhoods. The third is build-to-rent, constructing a property specifically to hold as a rental — or a short-term rental in Tennessee’s strong vacation markets — and refinance into a long-term [Tennessee DSCR loan](/dscr-loan-tennessee/) once it’s complete and leased. And the fourth is small multifamily construction, building a duplex, triplex, or small apartment building, which often graduates into our [Tennessee multifamily program](/multifamily-loans-tennessee/).
Ground-Up Construction Requirements
New construction asks more of the borrower than any other short-term loan, because you’re financing a plan, not a finished asset. Experience carries real weight — builders who’ve completed ground-up projects get the strongest terms, though first-time builders aren’t shut out when the team and plan are solid. The project package matters: architectural plans, a realistic and detailed budget, the permits or a clear path to them, and a timeline. Land and equity are part of the structure — you’ll generally bring the lot and some cash, which sets your loan-to-cost. Credit is reviewed, though the project and team drive the decision. And the exit has to be clear — a sale on completion or a refinance into permanent financing.
Construction Lending Across Tennessee's Major Markets
We fund ground-up projects across all of Tennessee’s major markets. In Nashville, our busiest market, we finance constant new construction and infill across a metro growing as fast as any in the country. In Memphis, affordable land supports spec building and small multifamily. In Knoxville, steady growth and university demand keep builders busy. And in Chattanooga, a revitalizing market supports new development. We also lend across Clarksville, Murfreesboro, Franklin, and the surrounding submarkets statewide.
Tennessee Factors That Shape Your Construction Deal
Low carrying costs help your rental exit. Tennessee has no state income tax and one of the lowest effective property-tax rates in the country — roughly half a percent of value, with residential property assessed at 25% of appraised value. Lower taxes mean lower PITIA, which lifts the DSCR on your build-to-rent takeout and makes it easier to refinance the finished property into a Tennessee DSCR loan.
A landlord-friendly, no-rent-control state. That operating flexibility is part of why build-to-rent works well here, especially in the fast-growing Middle Tennessee suburbs.
Permitting and reappraisal vary by county. Impact fees, permit timelines, and reappraisal cycles differ a lot between Davidson, Williamson, and rural counties. Those soft costs sit outside your vertical build budget, so build them into your numbers early — our construction loan calculator has dedicated line items for entitlement, permits, and horizontal infrastructure so nothing lands as a surprise in your cash-to-close.
How Tennessee Construction Loans Get Paid Off
Every ground-up loan ends one of two ways. If you’re building to sell, the sale of the finished property pays off the loan and books your profit. If you’re building to hold, you refinance into permanent financing once the property is complete and, for a rental, leased — most often a [Tennessee DSCR loan](/dscr-loan-tennessee/) that qualifies on the new property’s rent, including short-term rental income in Tennessee’s tourism markets. In some cases a [Tennessee bridge loan](/bridge-loans-tennessee/) carries the project through the gap between completion and permanent financing. We map the exit at the start so the whole structure points cleanly at the finish.
Tennessee Construction Loan Parameters
Loan Details
Frequently Asked Questions
Funds are released through a draw schedule rather than all at once. We disburse money in stages tied to completed milestones — foundation, framing, mechanicals, finish work — and an inspection confirms each stage is done before that draw releases. You typically pay interest only on the funds drawn so far, so your early payments are small and grow as the build progresses.
Experience helps and earns the best terms, because execution is the biggest risk in any build, but first-time builders can still qualify. When a borrower is newer to ground-up construction, we look more closely at the project package and especially the general contractor. A detailed budget, proper plans, and clear permits go a long way toward making a first Tennessee project fundable.
A fix and flip loan renovates an existing structure, while a ground-up construction loan builds a new one from the ground up. Construction loans rely on detailed plans, permits, and a milestone-based draw schedule, and they generally run longer because building takes more time than renovating. Both are short-term investor loans that exit through a sale or a refinance.
Yes. Build-to-rent is a common use, especially in fast-growing Nashville. You finance the build with a construction loan, then refinance into long-term financing such as a DSCR loan once the property is complete and leased. The DSCR refinance qualifies on the finished property’s rental income — long-term or short-term — rather than your personal income.
Most run twelve to twenty-four months to match a typical build timeline, with the exact term set to fit your project’s scope. They’re short-term by design and meant to be replaced once the structure is finished — paid off by a sale or refinanced into permanent financing. We build in realistic margin so the project has room to reach completion.
We lend statewide. Nashville is our highest-volume market, but we finance ground-up construction in Memphis, Knoxville, Chattanooga, Clarksville, Murfreesboro, Franklin, and the surrounding areas. Building costs, lot availability, and permitting vary by market, and we structure each loan to fit the project and the local conditions.
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